Who shall tell the President that his economic policies (does he have one?) are not working.
This reminds one of the tale of the emperor without clothes, a short tale about two weavers who promise an emperor a new suit of clothes that is invisible to those who are unfit for their positions, stupid, or incompetent. When the Emperor parades before his subjects in his new clothes, no one dares to say that he doesn’t see any suit of clothes until a child cries out, “But he isn’t wearing anything at all!”
The protectionist policies of Nigeria’s Central Bank (CBN) Emefiele and his refusal to devalue the naira again — it has already been devalued twice in the past year — has alarmed observers, as has the lack of action taken by President Muhammadu Buhari.
Buhari has ruled Nigeria now since May 2015 all alone and in some cases making appointments without recourse to the National Assembly (case in point AMCON board and FIRS head), while Emefiele is sticking to a head scratching FX policy that is slowing growth, disrupting the market process of allocating FX amid discontent among his MPC (monetary policy committee) peers.
Jan Dehn, head of research at Ashmore, the emerging markets-focused asset manager says:
“Nigeria needs to acknowledge that oil prices have fallen and that prices, including the FX, must adjust accordingly, even if it hurts in the short term. This is vastly preferable to entering a heterodox system that creates perverse incentives and results in permanent and ever-worsening distortions .Where is Buhari? Is he in control of economic policy at all?”
Nigeria’s economy which had been averaging 8 percent growth over the past 5 years is currently decelerating fast.
GDP growth rose by 3.96 percent in the first quarter (Q1) of 2015 and 2.35 percent in the second quarter (Q2) of 2015.
Research firm financial derivatives Company (FDC) forecasts growth of 2 percent and 1.8 percent in the third and fourth quarter of 2015 respectively.
The manufacturing sector, which accounts for 10 percent of GDP, is already in recession as it contracted for a second consecutive quarter, by 3.8 percent year on year in Q2 2015, compared to growth of 14 percent a year earlier.
The NSE – all share index a broad benchmark of Nigerian stocks has returned -14.33 percent year to date.
Meanwhile JPMorgan last week removed Nigeria from its influential emerging markets bonds index amid concerns about the country’s economic management.
As frustration with his administration grows, the president’s office urges patience.
More than three months since he took office, Buhari has neither appointed a cabinet nor charted an economic policy vision, frustrating investors.
Buhari’s spokesman said on Thursday that “there is no alternative to patience”
Yet, in reality, the call for patience is wearing thin and increasingly indicating that perhaps they have no idea of the true state of the economy or what policies should be pursued to reflate it: In other words “the emperor has no clothes.”